System for monitoring increasing income financial products

ABSTRACT

The increasing income financial product is a financial contractual product or program wherein a subscriber invests and designates primary and secondary beneficiaries. Investment plans include (a) lump sum (b) periodic (c) a pledge of an asset, or (d) combinatory. The primary beneficiary is assigned to a group of similar beneficiaries and to a certain contract group. With pledges, when the primary dies, the pledged assets are gathered by an administrator. Income is paid according to the contract to surviving primaries on an increasing, survivorship basis until (a) all primaries die; or (b) a predetermined percentage die; (c) the contract expires per its parameters; or (d) upon any other contractually defined event. Alternatively, the increasing income may be paid to the surviving members based upon mortality tables. Upon expiration, the surviving primaries or designated secondaries receive pro rata shares of the principal from the contract group. A self-directed financial investment feature enables the subscriber/primary beneficiary to direct investments.

[0001] This is a continuation of Ser. No. 09/617,071, filed Jul. 17,2000, now pending but to be issued Jul. 2, 2002 as U.S. Pat. No.6,415,267, and a continuation-in-part of U.S. patent application Ser.No. 09/412,836, filed Oct. 5, 1999, now pending which is acontinuation-in-part of U.S. Pat. No. 6,061,661, issued May 9, 2000,formerly, U.S. patent application Ser. No. 09/327,728, filed Jun. 8,1999.

BACKGROUND OF THE INVENTION

[0002] The present invention relates to a method for electronicallyprocessing transactional data and monitoring funds invested in anincreasing income financial product.

[0003] U.S. Pat. No. 5,864,685 to Hagan discloses an increasing incometrust computer transaction system and an insured investment accountsystem. This patent disclosure relates to a certain financial productwherein a subscriber purchases an annuity contract or an irrevocabletrust and identifies a primary beneficiary for that contract or trust.The primary beneficiary may be the subscriber or may be another party.Primary beneficiaries having actuarially similar characteristics aregrouped together. “The trust corpus is funded with the annuity contractprincipal and/or the annuity contract income of subscribers. Each of theprimary beneficiaries (typically the subscribers themselves, butpossibly other individuals) receives payments from the trust income. Aseach subscriber dies, the trust income is distributed to the remainingprimary beneficiaries. When the last subscriber dies, the trust corpusis distributed proportionally to secondary beneficiaries, typically theheirs of the primary beneficiaries.” Col. 3, lines 51-60. Accordingly,the system described in Hagan No. '685 utilizes a data processing methodwhich involves determining when the subscriber dies, computingincreasing income trust fund payments to surviving subscribers who aregrouped together in the same actuarial group as the decedent, anddistributing the corpus of the trust, on a prorata basis, to allsecondary beneficiaries upon the death of all subscribers in theactuarial group.

[0004] U.S. Pat. No.5,631,828 to Hagan discloses a method and a systemfor processing federally insured annuity and life insurance investments.U.S. Pat. No. 5,291,398 to Hagan discloses a method and a system forprocessing federally insured annuity and life insurance investments.U.S. Pat. No. 4,752,877 to Roberts et al.; U.S. Pat. No. 4,642,768 toRoberts and U.S. Pat. No. 4,722,055 to Roberts disclose computer systemswhich monitor financial products. These products fund future events orexpenditures. For example, if a person wanted to fund the collegeeducation of his or her child, the Roberts system provides a financialproduct which is monitored and maintained by a computer which collectspremium from subscribers, projects the future cost of a collegeeducation and invests the premium payments and requests additionalpremium payments in order to achieve the subscriber's goal, to wit, topay for the college. Roberts' system also discloses the funding ofretirement and nursing home expenditures.

[0005] None of the aforementioned prior art patents disclose certainimportant data processing features which establish the viability, growthand continued maintenance of an increasing income financial product.

SUMMARY

[0006] The present invention responds to administrative problemsassociated with an increasing income financial product and addressesdeficiencies in the prior art. The data processing system and methodaccording to a preferred embodiment of the present invention implementsan investment account structure establishing and providing an increasingincome financial product.

[0007] According to one embodiment of the invention, each subscriberinvests in a financial contractual product or program. Each subscriberdesignates primary and secondary beneficiaries. The subscriber hasvarious payment plan options to fund the financial product. Those plansinclude (a) lump sum payment, (b) periodic payments, (c) a pledge of asubscriber's financial asset, and (d) a pledge of a subscriber'sfinancial asset accompanied with periodic payments. The primarybeneficiary is assigned, along with a number of demographically similarbeneficiaries, to a certain contract group. In the event the subscriberutilizes the pledge payment plan, when the primary beneficiary dies, thepledged assets of the subscriber are placed under the control of thefinancial product administrator or its designee. Income is providedaccording to the contractual terms or parameters to surviving primarybeneficiaries of the same assigned contract group on an increasing,survivorship basis until (a) all the initial primary beneficiaries die;or (b) a predetermined percentage of the primary beneficiaries die; (c)the contract expires based upon the expiration of pre-established timeperiods; or (d) upon any other contractually defined event.Alternatively, the increasing income may be paid to the survivingmembers based upon mortality tables. When the contract expires, thesurviving primary beneficiaries (the percentage initially establishedper the financial product contract) or the designated secondarybeneficiaries receive their pro rata share of the principal from thecontract group. In one embodiment, the financial product is configuredas a self-directed financial investment wherein the subscriber/primarybeneficiary identifies the type of self directed investment structuresuitable to him or her and compatible with the designated contractgroup. The computer system monitors the return on investment (ROI) forthe selected, self directed assets, rolls or pours excessive ROI into asupplemental account for the benefit of the subscriber/beneficiary,issues calls for more premiums from the subscriber in the event that theROI does not meet contract ROI parameters, and otherwise monitors theaccount.

OBJECTS OF INVENTION

[0008] Thus, it is an object of the present invention to provide a dataprocessing system and method for implementing and administering aninvestment account structure consisting of increasing income contractswhose commingled principal is invested in any legal investment.

[0009] It is a further object of the present invention to provide a dataprocessing system and method for implementing an investment accountstructure consisting of contracts that pay out increasing income to thesurvivors (based upon actual mortality or estimated mortality) and whoseprincipal is subsequently distributed to the heirs (or to survivingbeneficiaries) upon expiration of the contract.

[0010] Another object is that the implementation provides minimumoverhead charges and maximum security so that beneficiaries are fullyinformed regarding the increasing income feature. Therefore, the systemprovides periodic reports to subscribers or beneficiaries, advising themof their relative progress towards their goals. It also provides reportsfor system administration and auditing.

[0011] A further object of the present invention is to provide a selfdirected financial product wherein the subscriber, or his or herbeneficiary, can select one or more investments or investment strategiesand inject his or her investment strategies into the increasing incomefinancial product described herein.

[0012] It is an additional object of the present invention to providevarious, flexible payment plans for the subscriber to fund theincreasing income financial product.

[0013] Yet other objects of the invention, its nature, and variousadvantages will be apparent from the accompanying drawings and thefollowing detailed description of the preferred embodiments of theinvention.

BRIEF DESCRIPTION OF THE DRAWINGS

[0014]FIG. 1 is a schematic diagram depicting the flow of informationusing a data processing system or method according to the presentinvention.

[0015]FIG. 2 is a flowchart of system functions as a data processingdiagram according to the present invention.

[0016]FIGS. 3, 4, 5, and 6 are flowcharts depicting storage maintenanceprocessing systems, with

[0017]FIG. 4 further depicting the system processing of subscribertransactions and FIGS. 5 and 6 further depicting contract and investmenttransactions systems.

[0018]FIG. 7 is a flowchart depicting premium processing and investmentprocessing systems.

[0019]FIGS. 8, 9, 10 and 11A and 11B are flowcharts depicting processingand payment tracking systems, the system processing of currentinvestments, new investments, increasing income payments and reportingthe same as part of a portfolio/accounting system, and the processing ofnew contracts.

[0020]FIG. 12 is a flowchart depicting increasing income paymentprocessing and investment processing to meet target increasing incomelevels.

[0021]FIGS. 13 and 14 are flowcharts depicting investment reportprocessing and housekeeping system.

[0022]FIGS. 15 and 16 diagrammatically illustrate flow charts for theself directed financial product system in accordance with the principlesof the present invention.

[0023]FIGS. 17, 18A and 18B diagrammatically illustrate funding thefinancial product with pledged assets, periodic premium paymentsaccompanied by a pledged asset account and the administration of thepledged assets after death of primary beneficiaries A, B and C.

[0024]FIG. 19 diagrammatically illustrates a flow chart showing anexemplary subscriber payment plan routine in accordance with theprinciples of the present invention.

DESCRIPTION OF THE PREFERRED EMBODIMENTS

[0025] The data processing system and method according the presentinvention is depicted as part of the schematic diagram of FIG. 1.Computer 100 comprises central processing unit and main memory (CPU) 102and disk storage 103. Computer 100 may be, for example, a singlesufficiently powerful computer or a network of computers jointly havingsufficient power.

[0026] Data and instructions that implement the process and method arestored in disk storage 103. The data are preferably maintained in entityrecords that include descriptive data as shown in Table 1. The data canbe organized as files, relational databases, or other equivalentstructures. TABLE 1 Entity Record Typical Descriptive Data (1)Subscriber Record Name; address; primary and secondary beneficiaries;Actuarial or demographic data; contract group designation; contractsinchoate and owned; Value of subscriber's total investment; Percentprincipal (P) subscriber owns; Net of all payments to and from thesystem. (2) Contract Record Owning subscriber; Contract terms orparameters; Payment history; Principal value. (3) Increasing IncomeRecord List of all primary beneficiaries assigned to contract group;Payment his- tory; Principal value. (4) Investment Record Name; address;investment data (characteristics, return on investment (actual andprospective), risk rating); time frame for investment; Net investment;income generated; management fee data. (5) Economic Forecast RecordCurrent and projected economic data (6) System Record Current date;Total value of the system; Total income for this period; Redemptiondata; Funds available to invest.

[0027] The instructions are processed by CPU 102 and are broken intocooperating modules. A preferred functional decomposition is listed inTable 2. The instructions can be written in procedural, database, objectoriented, or other equivalent computer OS language. TABLE 2 FunctionalModule Typical Functional Content (1) Storage maintenance Createsstorage areas on the storage media; accepts transaction input data andupdates storage areas; deletes storage areas. (2) Premium computationAccepts inflation and interest rate forecasts; computes premium to meetincome target goal specified in constant dollars; alerts administratorand/or subscriber if goal will not be met. (3) Payment tracking Acceptspayment data from contract and portfolio/accounting systems; computeseach subscriber's percentage ownership and funds available forinvestment by the system administrator. (4) Increasing income andprincipal payment Computes increasing income; generates orders toportfolio/accounting system to pay proportionate amount to survivingbeneficiaries (5) Investment monitoring Monitors investments to assurematch with increasing income contract parameters; monitors economicconditions, return on investment (prospective and actual); generatesorders to portfolio/accounting system to sell and/or buy if targetvalues are not met. (6) Investment Invests funds available; generatesorders to portfolio/accounting system to buy the most attractiveinvestments. (7) Reporting For each file or database, generatesexception, detail and summary reports.

[0028] Alternative, equivalent organizations of data and instructionswill be apparent to those skilled in this art.

[0029] The other elements of FIG. 1 depict the data flow environment ofa system and method according to the invention. Subscribers or investors104 typically correspond with administrators 105 who enter theirrequested transactions into the system. In a networked implementation,subscribers may deal directly with the system via home terminals. Theadministrators also enter transaction monitoring data and commandsdescribing and directing investment in bank 108 (e.g. certificates ofdeposit), stock brokerages 114 (stocks, bonds), investment brokerages116 (stocks, bonds, commodities, real estate) and investment contracts(described below), and are responsible for correct system functioningand auditing system transactions. Administrators 105 also handle anddirect investments via investment administrators 118. In a large, widelyheld financial product system, investment administrators 118 may beinvestment advisors (e.g., Goldman, Sacks or Merill Lynch) or insurancecompanies (Aetna). The entering of transactions by administrator 105 isindicated at block 106, which could be a terminal or other input device.The system produces reports, as indicated at block 107, foradministrators, subscribers and beneficiaries in any convenient outputform (electronic, print or a combination). Investment administrators mayalso utilize similar inputs and outputs 106, 107.

[0030] The invention obtains data describing the investments in banks108 and brokerage houses 114, 116 via communications link 109.Preferably, 109 is an automatic, telecommunications link. Alternatively,it could also require manual steps.

[0031] The system utilizes associated data processing subsystems thatare known in the prior art but which are combined together herein in aunique, inventive manner. Contract management and payment system 110 isa subsystem for managing financial product contracts, receiving premiuminvestments, making increasing income and principal payments, andtracking principal value. Portfolio and accounting system 111 is asubsystem for managing the investments, increasing income, and cash onhand. These subsystems may be implemented on computer 100.Alternatively, they may reside on a separate computer systemcommunicating via communications link 112 with computer 100. In eitherimplementation, contract system 110 receives from computer 100 datadescribing financial product contracts and sends to computer 100 datadescribing payment history and principal value of the contracts.Portfolio and accounting system 111 receives, from computer 100, datadescribing orders to buy or sell particular investments and sends, tocomputer 100, data describing income history and principal value ofoutstanding contracts and investments.

[0032] The following Abbreviations Table lists some abbreviations thatare used herein. Abbreviations Table 2d Ben. secondary beneficiaries $ppayment of pledged account accum accumulate bar A beneficiary A diesdemos. demographics (a defined statistical grouping of human population,especially concerning vital statistics) econ. economic exp. expired iincome or increasing income ii increasing income incr. increment,incremental, increase or increasing invest. investments JTROS Jointtenant with right of survivorship K contract - any legal contractualsystem in Financial Products Table max maximum mgt. management,typically referring to management fee for operating system or managingmoney min'm minimum P principal para. parameters pmt. payment pr premiumpayment prem premium payment Prime Ben. primary beneficiaries ROI returnon investment sb secondary beneficiary Sub'r/inv'tr subscriber -investor (may be any person or entity con- sidered a primarybeneficiary)

[0033] An important feature of the present invention is to group primarybeneficiaries (which may be subscribers purchasing the financialproduct) together into similar demographic groups and utilize a singlefinancial product contract for that group such that (a) the financialproduct generates increasing income for the primary beneficiaries (inaccordance with the contract terms); (b) the increasing income is basedupon a “survival theory” that is, primary beneficiaries that live thelongest get increasing income from the pooled principal of the entirecontract group because other beneficiaries in the contract group die andthe income is divided among fewer and fewer beneficiaries (for example,the income may increase due to the death of beneficiaries or mayincrease based upon mortality or actuarial tables (estimatedmortality)); and, (c) when the contract expires per its terms(pre-established parameters), the principal is distributed to thesurviving beneficiaries, or the subscriber's or primary beneficiary'sheirs or the secondary beneficiaries. There are several variations ofthe financial product that are explained herein. These variations andthe associated data processing method establish a viable and financiallysound product for investors.

[0034] Several types of financial-contractual structures can beimplemented to provide the increasing income product discussed herein.Financial Product Table irrevocable trust annuity life term of years(e.g., 5, 10, 15 yrs.) life plus survivor's life life plus survivor'slife limited by term of years life insurance mutual fund (closed end)limited partnership a contract any other type of legal contractualstructure embodying the financial concepts described herein

[0035] The terms “subscriber” and “investor” generally refer to theindividual or entity funding or paying the premiums for the increasingincome financial product. However, the subscriber may or may notdesignate himself or herself as a primary beneficiary to receive theincreasing income. The terms “subscriber” and “primary beneficiary” aresometimes used interchangeably herein. The contract is based upon agrouping of “primary beneficiaries” as described hereinafter. Typically,the “subscriber” is the person who funds the financial product and the“primary beneficiary” is a person or one of the people who receives theincreasing income. As an added feature, the subscriber/primarybeneficiary may change the secondary beneficiaries as permitted underlaw and in accordance with the contract terms of the financial product.Some of the contractually defined financial products do not permit thesettler or initial subscriber or primary beneficiary to change otherbeneficiaries designated initially in the contract terms.

[0036] Loans to these entities may be available in a manner similar toloans secured by whole life insurance contracts.

[0037] The following table lists different types of primarybeneficiaries. Primary Beneficiaries Table individualsubscriber/investor other person designated by the subscriber husbandand wife with right of survivorship (JTROS) two individuals legallyrecognized as being equivalent to husband and wife with right ofsurvivorship (JTROS)

[0038] It is important to note that reference to “a primary beneficiary”may be construed to cover two individuals, i.e. a husband and wife, eventhough a singular term “primary beneficiary” is used herein. If theprimary beneficiary covers two people, the “primary beneficiary” doesnot die until the last of the pair dies.

[0039] Also, it should also be noted that a closed end mutual fund isdesignated as a “contract” herein. The contract defines obligations andrights of (a) the financial product administrator; (b) the subscriber;and (c) the primary and secondary beneficiaries. It is believed thatmutual funds have sufficient legal constraints contained therein and maybe broadly classified herein as “contractual” in nature. Hence, themutual fund is a “contract” as it relates to the increasing incomefinancial product described herein.

[0040]FIG. 2 illustrates both the sequence of operations or method of asystem according to the invention and the flow of external data into andout of the system. The function of processes at blocks 201 to 208 aredescribed in Table 2, rows 1 to 7, respectively. If a system accordingto the present invention does not implement the economic analysis 209feature, the economic analysis process in FIG. 7 (ROI exceeding contractparameter target) will not be present, nor will the pieces of any otherprocess that are identified to process data representing economicanalysis.

[0041] After one or more input transactions have been gathered asindicated at block 106, the system starts processing at block 211 andcontinues to storage maintenance process 201, where data is input todisk storage 103. After one or more transactions have been input atblock 201, the succeeding processes, at blocks 202 to 208, are performedin the order illustrated. The system stops at block 212. Preferably,these processes would be performed at an appropriate interval, at leastmonthly but perhaps weekly or daily, depending on the frequency oftransaction input, premium and income payments, and other system events.External data representing investments (prospective and existing) isinput at function block 216. In a like manner, general economic data orforecast is input at block 218. This economic data includes, but is notlimited to (a) consumer and manufacturer's price indices, (b) inflation,(c) interest rate, (d) stock and commodity indices and (e) othereconomic data generally relied upon to base an investment decision.

[0042] A detailed description of the storage maintenance means isdepicted in FIG. 3. Storage maintenance means processing begins at block301 and ends at block 307, after which the system proceeds to the nextsequential process. Transaction data is input as indicated at block 106for processing at block 302. At block 303, the system checks if thetransaction is for a subscriber. If so, processing proceeds, asindicated label 4A, to continue as described in FIG. 4. If not, asindicated at blocks 304 and 305, the system checks for contract orinvestment transactions, respectively, and proceeds, as indicated atlabels 5 a or 6 a, respectively, to continue as described in FIG. 5, 6.If the administrator requests a repeat, as indicated at block 306, thesystem will branch to data input at block 302, else storage maintenanceprocessing exits at block 307.

[0043] With respect to the self directed (SD) financial product dataprocessing system shown in detail in FIGS. 15 and 16, if the subscriberselects an SD product, the system jumps at block 304 (FIG. 3) to FIG.15. If the subscriber/beneficiary chooses a new investment for an SDproduct, the system jumps from block 305 (FIG. 3) to FIG. 16. Further,the SD system effects the processing of data, reports and funds in FIG.7 at the portfolio and accounting input and encompassing steps 505, 506,507 and 508.

[0044] Now referring to FIG. 4, if a subscriber or investor transactionhas been input, at block 313 the system checks for a new subscriber. Ifso, then a new storage area for this subscriber is created at block 314to contain data similar to that listed in Table 1, row 1. This dataincludes designating primary and secondary beneficiaries. Other data maybe required as set forth below. The new primary beneficiary must beassigned to a contract. Herein, reference is sometimes made toassignment or segregating beneficiaries into contract groups. Sortfunction 344 represents this segregation by demographic characteristics.Necessary external data input is obtained at block 346. At block 315,the system checks if a new contract is needed, and if so a new storagearea for this contract is created at block 316 to contain data similarto that listed in Table 1, row 3 and as set forth herein. The systemassigns the beneficiary to a group at block 317. The process indicatedat block 318 updates these new storage areas.

Characteristics of Contract Group

[0045] Age (e.g., year of birth (single year bracket), multiple agebrackets (e.g., 2 year age brackets, 5 year age brackets or multi-yeargrouping))

[0046] Sex married—unmarried—divorced or separated

[0047] Race (if legally considered non-discriminatory)

[0048] Ethnic Background (if legally considered non-discriminatory)

[0049] Residence (city, state, region and/or country)

[0050] Health (potentially requiring a health certificate executed by aprofessional)

[0051] Smoker/non-smoker

[0052] During the development of the increasing income financialproduct, it was noted that there may be times when the financial productadministrator would accept funds from a subscriber (associated with adesignated primary beneficiary) but the administrator did not currentlyhave an “open” increasing income contract for that primary beneficiary.In other words on a simplistic basis, the increasing income financialproduct does not operate properly until a reasonably large number ofprimary beneficiaries (supported by funds from subscribers) are gatheredtogether in a singular contract group. Accordingly, contract inceptionparameters are necessary to assure the viability or financial health ofthe increasing income financial product. For example, the administratormay determine, based upon a subscription unit value of $10,000.00(minimum premium) that at least 100, but not more than 500 primarybeneficiaries must be assigned to a particular contract grouprepresented by a respective contract. Accordingly, the inceptionparameter for that contract would be either 100 primary beneficiaries or$1,000,000.00. The $1,000,000.00 financial pool minimum is based upon aminimum investment criteria established with the advice of investmentadministrators 118. The term “inception” as used herein refers to thebeginning of an obligation, on the part of the administrator, to payincreasing income based upon contractually established events orparameters to primary beneficiaries in a certain contract group. Thesecontractually established events may be actual mortality, estimatedmortality from actuarial tables or any other defined event. In otherwords, the “inception” refers to the period wherein the primarybeneficiaries could, under some possibility, receive increasing income.If the increasing income is delayed for a predetermined number of yearsor during a “quiet time” when no primary beneficiary receives any“increasing” income, the “inception date” for the respective contractand contract group begins at the beginning of the quiet period.

[0053] In a similar manner, the administrator does have financialobligations to subscribers who have provided funds to purchase theincreasing income product prior to the inception of the increasingincome period pursuant to the contract. Of course, if the contract doesnot become “effective” until 100 primary beneficiaries are identifiedand funded by subscribers, the administrator must refund or returnearlier subscriber's funds in the event the respective contract does notenter into its “inception phase” due to an insufficient number ofsubscribers/primary beneficiaries for that designated contract group. Atime period may be associated with this “refund period” prior toinception of the contract. These contracts are called herein “inchoatecontracts.”

[0054] In the event the administrator accepts funds from a subscriberand the system does not have an “open” contract, the funds are placed inescrow, information regarding the funds and potential new increasingincome contracts are placed in storage area 316 until the minimum numberof subscribers/primary beneficiaries is obtained for that increasingincome contract. At that point in time, the inception period for theincreasing income contract begins, the contract is “open” and thepreviously identified and sequestered funds are thereafter released forinvestment purposes by the administrator. In an advanced system, thesequestered funds may be conservatively invested. When the contract is“open,” beneficiaries' rights are no longer inchoate.

[0055] In a popular demographic group, the new subscriber/primarybeneficiary may cause an unacceptably large number of beneficiaries fora particular contract group. In other words, if adding the proposedbeneficiary to the existing contract group (n+1) exceeds a predeterminedmaximum number of beneficiaries or a predetermined total dollar amountfor that contract (for example, $10,000,000.00), the contract is“closed” and the proposed primary beneficiary/subscriber must bedesignated for another increasing income contract. These contractualconditions are called “closure parameters” herein. This may result inactivating the inception parameter conditions prior to opening a secondincreasing income contract for that proposed beneficiary. Closureparameters include (a) a maximum number of primary beneficiaries in acontract group and/or (b) a total monetary limit associated with theparticular increasing income contract for a respective contract group.Other contract closure parameters may be specified in the increasingincome contract such as external economic consideration (interest rateexceeding a predetermined annual amount) or civil disruption orcommotion, war, or other factors identifiable in the increasing incomecontract. The New Contract Inquiry Parameter Table set forth belowidentifies some critical concepts. New Contract Inquiry Parameters nomatch beneficiary age with existing contract or contract group havingsimilar age parameters n + 1 is less than minimum beneficiaries for acontract group n + 1 exceeds maximum beneficiaries for selected contractnew beneficiary does not match other contract group characteristics forany open contracts (sex, age, race, health (good or predetermined healthcondition (e.g. terminally ill with a certain disease))

[0056] It should be noted that the increasing income financial productmay be sold not only to healthy individuals (beneficiaries) but alsoindividuals who are subject to certain diseases, especially terminaldiseases. For example, based upon the demographics and survivalcharacteristics of persons with Acquired Immune Disease Syndrome (AIDS),the increasing income financial product may be particularly attractive.A key concept in the viability of the financial product is the theorythat the beneficiary, designated by the subscriber, will survive alonger period that other similarly situated beneficiaries. Particularly,healthy individuals will make more money from the increasing incomeproduct as compared with less healthy individuals. However, since healthis a relative concept, terminally ill patients such as AIDS patients,may readily participate under the theory that if they do survive a longperiod of time, they will be financially rewarded. This may provide anincentive to comply with aggressive medical treatment. In such asituation, a physician's certificate certifying that the primarybeneficiary has a certain health condition would be appropriate.Further, the demographic input in block 346 is meant to encompasschanging survival rate data and factors from the general populace whichmay affect the inception or closure of a particular contract group foran increasing income financial product. The administrator may becontractually permitted to “close” the contract group based upondemographic or survival rate data without resort to fixed a number ofparticipants or time factors.

[0057] The New Contract Inquiry Parameter Table set forth aboveidentifies some major concepts regarding whether or not a new increasingincome contract is necessary based upon a proposed primary beneficiarydesignated by a paying subscriber.

[0058] Process at block 317 assigns the new subscriber to a contract,that consists of up to approximately 200 other subscribers/beneficiarieswith similar demographic or actuarial characteristics and equalinvestments. Other participation limits may be established. Thisgrouping of beneficiaries may be done by consulting mortality tablesindexed by the chosen actuarial characteristics and picking onlysubscribers/beneficiaries with expected time until death in a fixednarrow range. For example, a given financial product contract maycontain only subscribers with expected time to death of 30 years to 30years and six months and investments of $500,000. Another contract groupmay have minimum investment units of $10,000.00 but the inceptioncriteria may be set at 500 subscribers or beneficiaries.

[0059] At block 319, the system checks for a transaction indicating thedeath of a beneficiary or expiration of the contract. If not, subscribertransaction processing is complete. See return 3R to FIG. 3. If so, thenthis beneficiary's remaining principal must be rolled over into theassigned contract group principal by the process at block 320. Byrolling over the principal, all future income from the contract groupprincipal is paid to survivors in the group. This requires increasingincome and contract storage area update at block 321. This event alsoresults in higher income payments being made to the remaining primarybeneficiaries or subscribers.

[0060] The system performs a further test at block 322 by fetching allthe subscriber/beneficiary storage areas assigned to the contractupdated at blocks 320 and 321 and checks to determine if the designatedbeneficiaries have all died or if the contract has expired by its terms.Contract expiration may be triggered based upon a number of predefinedevents, including but not limited to the death of a predetermined numberof primary beneficiaries. If not, processing is complete, and the systemreturns, as indicated at label 3R, to continue as indicated in FIG. 3.If so, then this contract must be terminated, as indicated at block 323;specifically, the contract principal is distributed ratably to theultimate beneficiaries (surviving primary beneficiaries and decedents'secondary beneficiaries) specified by the subscriber areas tested atblock 322. This is the expiration of the contract. Then, at block 324,all data areas for this contract and these subscribers are deleted fromthe storage means. Contract Expiration Table Contract expires when: allsubscribers/investors in contract group die set term of years frominception or closure of contract the earlier of a set date or a term ofyears after inception or closure of a contract upon the occurrence ofany other predetermined, contractually identified event or events uponthe death of a predetermined number of primary beneficiaries

[0061] Turning now to FIG. 5, if a contract transaction has beendetected, processing continues at connector 5A. At block 335, the systemchecks for a new contract, and if so, a new storage area for thiscontract is created by 337 to contain data similar to that listed inTable 1, row 2 and as described herein. Prior to inception of acontract, a “hold funds” or “inchoate” storage area is utilized. Acontract transaction will occur when a subscriber pays a recommendedpremium to administrator for the increasing income product. Finally, asindicated at block 316 (FIG. 4), the system updates the contract storagearea with the input data. With every new subscriber/beneficiary,contract parameters or conditions must be met, premiums to be made by asubscriber, increasing income plans selected (e.g. (a) pay income frominception to death; (b) delay payments for x years, then pay incomeuntil death; (c) pay a reduced income level for y years, then increaseincome to full “survivor” value until death), and (d) income targetvalues for the contract selected. Further, if the product pays incomefrom inception through death, invasion of principal parameters should beselected by the subscriber/beneficiary. The following Contract MatrixTable lists major parameters or elements to be selected. “ROI” refers to“return on investment” targets. Contract Matrix Table Beneficiary/ROIIncome Invasion of principal n primary beneficiaries now or after xyears no n min'm Prime Ben. whatever yes n min'm Prime Ben. whatever non max'm Prime Ben. whatever yes or no n min'm and max'm preferred % Pprobably no plus ROI target (no guarantee) n min's and max'm withinpre-set limits probably no plus min'm ROI (inc. income capped) n - plusmin'm ROI only min'm limit yes n - plus min'm ROI no limits yes

[0062] By providing a variety of increasing income products for the samebeneficiary contract group (e.g. males 50-52 years old), theadministrator can provide an “aggressive” product (i.e., invasion ofsubscriber's principal, no upper limit on increasing income) and offerto the same subscriber/beneficiary a “conservative” product (i.e., noinvasion of principal, income based exclusively on survivorship). Othercombinations are possible as outlined above in the contract matrixtable.

[0063] The following Premium Payment Table provides options for fundingthe financial product. Premium Payment Plans lump sum periodic paymentsfor term of years

[0064] If an investment transaction has been detected, processingcontinues in FIG. 6 as indicated at label 6A. At block 338, the systemchecks for a new investments, and if so, a new storage area for thisinvestment is created at block 340 to contain data similar to thatlisted in Table 1, row 4 and as set forth herein. A new investment willbe utilized when the administrator decides that (a) the return oninvestment or “ROI” is insufficient; (b) the future ROI projections areinsufficient; (c) the investment is liquidated in accordance with itscustomary terms (e.g., expiration of a certificate of deposit or anoption); or (d) the projected ROI, plus or minus a tolerance factor andthe economic forecast data shows an inability to meet contractualincreasing income obligations. Block 349 classifies the investment as,for example, aggressive, intermediate, conservative, income generatingor capital accumulation, sets investment time frame T and logs in datarelating to risk factors (statistical analysis based upon investmentbenchmarks, e.g., volatility versus S & P 500 stock index.) Finally, asindicated at block 339, the system updates the investment storage areawith the input data. Processing then returns to FIG. 3, as indicated atlabel 3R.

[0065] A detailed description of the premium computation system andmethodology is depicted in FIG. 7. Premium computation processing systembegins at block 501 and ends at block 504, after which the systemproceeds to the next sequential process. Beginning with a storage areafetch as indicated at block 502, the system proceeds through to block503 in implementing a scan of all subscriber storage areas in diskstorage 103. For each subscriber area, the process fetches all thecontract data for this subscriber at block 502. A feature of thisinvention is this periodic update in steps and sub-systems 502, 503inform each subscriber of progress towards income goals by reviewingcontract premium commitments. As set forth above, some subscribers fundthe financial product contract with a lump sum. This funding is expectedto be typical. Others may fund the contract with periodic payments, inthe nature of insurance financial products. If deficiencies areidentified, the subscriber is informed and correction optionsrecommended by report, as indicated at block 1002 in FIG. 13.

[0066] The investment performance system is depicted in FIG. 7, blocks111, 505 through 513.

[0067] At block 505, the system obtains from external sources relevanteconomic forecasts, particularly inflation, interest rate, GDP andeconomic growth forecasts for future years. Additionally, the systemobtains return or investment or ROI data in function block 505.

[0068] Data input at block 505 and the test at block 509 implement aloop to extract all portfolio and accounting investment data accumulatedfor this period (daily, weekly, monthly, etc.) from portfolio andaccounting system 111. At blocks 506, 507, and 508, the systemdetermines whether the payment of investment income is received, ROIexceeds the contract parameters, or principal is received (a) from asubscriber due to the purchase of the increasing income financialproduct; or (b) sale of an investment, respectively. For incomereceived, as indicated at block 510, the system updates the incomepayment history for the particular investment in the storage area forthe particular contract involved. Then, at block 511, the systemaccumulates the total income received by the benefit structure in thisperiod by summing the income for all contracts. This information updatesthe system record, which contains data similar to Table 1, row 6.

[0069]FIG. 7 is linked to FIG. 10 via link 10A. FIG. 10 depicts systemprocessing for monitoring investment performance ROI. At block 534, thesystem determines whether a new investment is involved. If so, a storagearea for the contract is updated at block 537 to mark the investmentdata as a “watch ROI” and list that “watch” or warning data with thedata listed in Table 1, row 4. If the investment does not exceed ROIexpectations (test 507, FIG. 7) and an old or a previous “watch ROI” isnoted with the investment tested in block 534 or detected ROI is farbelow expectations, a new contract storage area is created at block 535and the investment record storage area is updated by 536. ROI data isupdated at block 536 to reflect the new information. Block 550 directsthe financial product computer system to sell and buy investments tomeet (a) actual increasing income target values with sufficient ROI(received investment income and/or realized capital gains frominvestments) and (b) projected income targets based upon actual plusprojected ROI for investments.

[0070] For prospective economic and ROI analysis, the investment storagearea is updated to reflect a possible “ROI watch” at block 513 toreflect the potentially new problem to meet the contractual commitmentsfor increasing income.

[0071] Returning to FIG. 7, test block 508 determines whether investmentprincipal has been received. Typically, this is due to the sale of aninvestment. However, the receipt of subscriber premiums also reflectsthe receipt of principal. The appropriate storage area is updated inblock 512, and the investment is marked SOLD in 513. The system thenjumps to FIG. 10, the sale, purchase and selection of new investments tomeet (a) current income targets with current ROI; (b) projected targetswith future ROI; and (c) redemption and sales of the product bysubscribers. Current redemption and refunds may also be paid out ofincome.

[0072] As an added feature, the subscriber, primary beneficiary, and, insome cases, the secondary beneficiary may obtain a loan from the systemadministrator based upon the value of the financial product. This loanfeature is similar to loans provided on whole life insurance policies.

[0073] Turning now to FIG. 8, beginning with a storage area fetch asindicated at block 514, the system proceeds through block 521 toimplement a scan of all subscriber storage areas stored in disk storage103. For each subscriber area, process steps as indicated at blocks 515to 520 are performed to determine the current value of each subscriber'sor beneficiary's total investment in the benefit structure, the totalvalue of the benefit configuration, and the net total of all subscriberpayments. All the subscriber's contract storage areas are fetched atblock 515. Subscriber net total payment is computed from these areas.The value of the total principal investment of a deadsubscriber/beneficiary, tested at block 516, is simply the finalprincipal balance of all subscriber owned contracts, which is updated atblock 517. For a living subscriber/beneficiary, the current income “i”value of all contracts is computed, by means known to those of skill inthe art, at block 518. The survivors in the contract group will receivegreater income “i” payments due to the death of a contract group member.Alternatively, increasing income is paid out based upon mortalitytables. At block 519, the subscriber total investment current value andnet payments are updated. At block 519, all the subscriber values andpayments are summed to obtain the total value of the investmentstructure and the total net payment into the structure. These valuesupdate the system record.

[0074] Payment tracking and demographic versus ROI and increasing incomecommitment processing system continues as depicted in FIG. 9. Beginningwith a storage fetch at block 522, the system proceeds through block 524and complete scan test 560 to implement another subscriber storage areascan during which each subscriber's/beneficiary's increasing income “i”from the benefit structure is computed at block 523. This is simply doneby dividing the total value of investment group income by the totalnumber of surviving subscribers/beneficiaries in the group. Economicfactors, projected ROI and demographic data 346 are also accounted forby the input to block 523. That block computes current incomecommitments, funded by current ROI, future commitments which may becontingent upon the demographics or projected survival rate for thecontract group dependent upon the contract parameters. Test 524 assurescompliance with income target parameters, whether guaranteed or not, inthe respective contracts.

[0075] Beginning with a storage area fetch at block 525, the systemproceeds through block 531 to implement a scan of all investment storageareas stored in disk storage 103. For each investment area, processsteps at blocks 526 to 530 are performed to determine the current ROIfor each new investment in each contract group, the economic forecastrelevant to the new investment and the increasing income commitment forthat contract group. This process and subsystem establishes thestability of the benefit structure. This feature is carried out byfetching all ROI and relevant economic forecast data (if this forecastis included as part of the system) for each contract group as indicatedat block 526. If an ROI of an investment does not exceed a target incomelevel for a certain contract group (whether the income is guaranteed orsimply estimated by the financial product administrator), a sell orderis generated 527, a new investment is identified with an appropriate ROIand a buy order is generated. If contract funds are reinvested, at block527, its storage area is deleted at block 528. The total of allindividual investment portfolios from all the contract updates in theinvestment record are updated at block 529. The investment totals arethen summed to compute the total system increasing income and principalvalues at block 530. This information updates the system record.

[0076] Finally the income generated funds from the investment arecomputed at block 532. This information also updates the system record.

[0077]FIGS. 11A, 11B and 12 are flowcharts depicting processing ofincreasing income payments and reporting of the portfolio/accountingsystem, processing new contracts, and increasing income paymentsprocessing and investment processing to meet income target values ortarget increasing income levels.

[0078]FIG. 11A and processing steps 602 through 607 review, each opencontract which has been triggered and is in the “inception” period,computes the percent ownership of the subscriber/beneficiary, computesthe income allocation from the fund of money for the respective contractgroup, fetches the subscribers/beneficiaries' record, computes “i”payment (based upon actual survivorship or estimated survivorship) andgenerates payment data. The payment generation data is sent toportfolio/account system such that the administrator, via thecomputerized system for maintaining and monitoring the increasing incomefinancial product, issues a paper or an electronic check to thesurviving beneficiary associated with a particular contract group. Thetest 608 determines whether there are any additional open contractssubject to payment of the increasing income feature.

[0079] It should be noted that the contract, during the inceptionperiod, may have a “no-payment” period or a “constant level income”period. With a no-payment for a certain term of years contract, theincome generated by the principal associated with a particular contractgroup accumulates during the quiet or “no payment” term therebyincreasing the overall value to the contract group as well as to thebeneficiaries. For example, an increasing income financial productpurchased by a 30 year old may not pay any income for a period of 25years, that is, until the subscriber/beneficiary reaches 55. Allbeneficiaries are 30 years old at inception. At this 55 year old age,the subscriber/beneficiary may be interested in retirement. During the25 years, accumulated income greatly increases the total value of thefinancial product for the beneficiary. In contrast, a 50 year oldpurchasing the increasing income product may wish a “constant level”income stream from his or her investment for a period of 15 years.Thereafter, the investor/beneficiary may want an increasing incomefinancial benefit from the financial product. In the case of a 30 yearold when he or she reaches 55, the subscriber/beneficiary may want toactivate the increasing income feature. Some of these concepts are setforth below in the First Tier Income Payment Plan Table. First Tier(Income) Payment Plan Table increasing income based upon number ofsubscribers alive in contract group (full “i” return less % retainageless mgt.fee) increasing income with floor or ceiling (with or withoutinvasion of principal) increasing income after term of years(elimination period T prior to i payments to primary beneficiaries)increasing income for life of husband and wife, both designated as aprimary beneficiary

[0080] Upon the death of a primary beneficiary, the increasing incomefinancial product may further include a contract parameter whichprovides some (a) benefit to the secondary beneficiary or beneficiaries(herein, reference will be made to a beneficiary however such referencealso refers a plurality of beneficiaries); or (b) the ability of thesecondary beneficiary to redeem the remaining value of the principal atan earlier time than the formal expiration of the contract. In the eventof early redemption, the returned principal is greatly discounted.Redemption may be requested by the subscriber acting as a primarybeneficiary or, in, some cases such as an irrevokable trust, by theprimary beneficiaries (with the approval of the secondary beneficiaries,if legally required) before the group contract “expires” per its terms.In the event of early redemption (which, under some circumstances, maybe characterized as a “refund,”) the distribution of invested funds tothe party requesting the refund is greatly discounted. As describedearlier, the contract may expire at (a) the death of all primarybeneficiaries in a contract group, (b) a predetermined or preset timefrom inception of the contract; (c) a predetermined time from closure ofthe contract; (d) or any other contractually identified event; or (e)after a predetermined number of primary beneficiaries die. In the eventthe secondary beneficiary wishes to withdraw principal established bythe initial subscriber prior to contract expiration, the followingSecond Tier or Intermediate Payment Plan Table provides some options forthe redeeming party. Second Tier (Intermediate) Payment Plan Table nopayments until contract expires (death of subscribers or term of years)nominal, periodic payments until contract expires lump sum payment fullydiscounted to reflect survivors in K group, present actuarial ordemographic mortality rates and tables less % retainage

[0081] At the expiration of the contract, the secondary beneficiary maybe presented with several options regarding utilization of theprincipal. Some of these options are set forth in the Tertiary or ThirdTier Payment Plan Table set forth below. Tertiary or Third Tier PaymentPlan Table lump sum annuity term of years or life any other legaldistribution method with or without tax planning

[0082] The secondary payment plans and tertiary payment plans may beimplemented and offered as part of the computerized system to maintainthe increasing income financial product at steps 319 through 323 in FIG.4.

[0083]FIG. 11B provides a flowchart showing the major process steps forassociating a contract or a contract group with a primary beneficiaryestablished by a subscriber. Functional steps 652, 654 fetchessubscriber and primary beneficiary data in contract data from therelevant record files. Test 656 determines whether an open contractmatches with the demographics or characteristics of a primarybeneficiary. If not, test 658 determines whether the primary beneficiarycharacteristics match any inchoate contracts. Inchoate contracts, asused herein, referred to contracts that have been placed “on hold”wherein the system administrator has accepted funding from a subscriberbut has not opened a increasing income contract. Inchoate contractsrefer to contracts which have not entered the inception phase due tominimum number of subscribers/beneficiaries minimum investment amountsor other reasons and further relates to contracts wherein theadministrator has financial obligations to the funding subscribers priorto inception of the increasing income contract. Generally, thoseobligations include a return of funds. If no matches is found with theprimary beneficiary and any existing contracts marked inchoate, the NObranch is taken and the contract and subscriber records are updated inprocess steps 670. A report is generated in step 672 both electronicallyand, preferably in print, indicating to the subscriber and thedesignated primary beneficiary of the incomplete or incipient nature ofthe increasing income contract. This enables the subscriber/beneficiaryto request a refund or a redemption of his or her funds.

[0084] If an inchoate contract match is found, the system executes test674 which determines whether the inchoate contract group exceeds thecontract inception parameters. As stated earlier, these contractinception parameters may include minimum numbers ofsubscribers/beneficiaries, minimum total investment for a contractgroup, or other identifiable contractual parameters. If so, the systemin test 674 executes the contract system premium function block 110. Thesame result is obtained from test 656 wherein a match is found betweenthe primary beneficiary and any open increasing income contracts.Referring briefly to test 674, if the minimum inception parameters in acontract are not met, the system updates the relevant records infunction block 670. The contract system function block 110 particularlyidentifies the premium payments as specified earlier in connection withFIG. 7. Function block 678 updates relevant records and function block111 relating to the portfolio/accounting system and invests the newsubscriber's funds with the other contract group members.

[0085]FIG. 12 shows a flowchart for monitoring contract funds in otherto achieve income target values or target increasing income levels. Asstated earlier, these increasing income targets may be guaranteed or maybe simply suggested in the contractual terms established by theadministrator. In function block 702, the system obtains new return oninvestment ROI information, new economic information and new demographicinformation as necessary to monitor the total investments and mix ofinvestments by the administrator. Step 703 fetches subscriber/investorinformation in contract group data. The computation of increasing incomein both a current sense and a future sense is determined in functionblock 704. Since a broad based increasing income financial product willrequire funds for redemption within 30-60-90 days as well as otherexceptional circumstances (for example those set forth above in thesecondary payment plan), it is advisable to maintain the financialstability of the financial product and to compute current cash flowneeds for redemptions and increasing income contractual payments as wellas long term payments. Step 704 recognizes that if financial productsguarantee a minimum increasing income level through the life of aparticular primary beneficiary group, the financial system must monitorthe quality of return on investment for each investment and alsomonitor, for example, the death rate or demographic data of a particularcontract group in order to meet the suggested or contractuallyimplemented and/or guaranteed increasing income target levels.

[0086] Step 705 determines whether the current investments meet theincome target values on the basis of each contract group as well as onthe basis of the entire financial product system. If not, test 706generates sell orders and activates the portfolio accounting systemfunction block 111. If YES, the system tests in step 708 whether thereare any additional investment items to be reviewed. The system exits instep 709.

[0087] A detailed description of the reporting means is depicted in FIG.13. Reporting means processing begins at block 1001 and ends at block1007, after which the system exits from its processing for this period,as indicated in FIG. 2 at block 212. Subprocess steps at blocks 1002 to1006 generate reports on all entities stored by the system in diskstorage 103. These entities are listed in Table 1 and shown in thedrawing as subscriber/beneficiary/investor reports, (e.g. remainingbeneficiaries) income “i” and principal “P” reports to specificbeneficiaries, general reports on the condition of investments, andtotal portfolio performance (for system and specifically for investor).

[0088]FIG. 14 details these report subprocesses, one for each type ofentity. They begin processing at block 1008 and exit at block 1016.Beginning with a storage area fetch at block 1009, the system proceedsthrough block 1015 to implement a scan of all storage areas of theparticular entity stored in disk storage 103. At block 1010, the systemgenerates exception reports requiring immediate auditing oradministrative attention. For example, exception conditions forsubscribers may include a missed premium payment by subscriber/investor;for investments, an out of limit ROI condition, etc. For the correctdate, which may be weekly, quarterly, yearly, etc., at block 1013 thesystem generates detail reports, for example listing all entityinstances, and summary reports, for example providing totals of variousquantities of interest.

[0089]FIG. 15 diagrammatically illustrates the flowchart or proceduresfor the self directed financial product. The entirety of the selfdirected product process may be implemented as a single module in thecomputer program system or the module and flowchart can be broken up anddistributed throughout the other computer sub-routines and processesdescribed herein. When the administrator offers the self directed (SD)financial product to the public and a subscriber seeking a new contractexecutes step 110 relating to the inquiry regarding a new contract, theprocess in step 1202 permits the subscriber to select the type ofself-directed financial product he or she wishes. The following tableprovides some examples of certain self directed financial products. Theterm “self directed” refers to the ability of a subscriber or primarybeneficiary to select either individual investments or investmentstrategies. Self Directed Investments Table listed investment (e.g.,blue chip equity, mutual funds, high grade bonds, CDs, index funds ortrusts) -- [subscriber picks one or more listed investments] completelyself directed (excluding high risk options, derivatives, pink sheetequities, bulletin board equities, bonds having rating lower than BB,non-US equities, etc.) [subscriber picks any investment - systemexcludes certain unacceptable investments] aggressive high risk, highreturn portfolio management (similar to an aggressive, high risk mutualfund) moderate risk-return portfolio conservative risk-return portfolio

[0090] As is apparent from the Self Directed Investments Table, thesubscriber may simply select an investment portfolio strategy such thatthe subscriber is willing to accept the risk and the potential benefitsof an aggressive portfolio management style, a moderate portfoliomanagement style or a conservative portfolio management style. Theseterms (e.g. “aggressive”) have generally accepted meanings in thefinancial community especially as the terms relate to mutual funds (seeLipper mutual funds ratings) and various ratings of U.S. and foreignequities. Otherwise, the investor may self direct his or her investmentby selecting equities or various other financial products from a selectlist. Further, the subscriber may be permitted to invest in a wide rangeof financial products excluding certain very high risk products. Thelist of excluded investments is not meant to be limiting or to describeall types of excluded investments. Based upon the popularity of theincreasing income financial product, there may be sufficient demand inthe marketplace to provide a large pool of subscribers/beneficiaries fora high risk, self directed financial product providing increasing incomefeatures. These high risk financial products may include foreignequities, options, derivatives and other very high risk financialproducts. Presently, the limiting factor seems to be the number ofsubscribers or primary beneficiaries which are placed in a designatedcontract group and which are willing to accept the high risk nature of aself directed financial product wherein each of the subscriber/primarybeneficiaries could select very high risk financial products to fund theincreasing income contract fund. Others in the pool may not select suchhigh risk investments.

[0091] Returning to FIG. 15, at step 1204, the administrator setsperformance parameters for the new contract selected by the subscriberbased upon the demographics in the contract group and based upon thedemographics of the primary beneficiary elected by the subscriber. Step1206 updates the records as explained above regarding subscriberinformation, beneficiary information and invested funds and contractinformation. Step 1208 recognizes input from portfolio system input 111.

[0092] In step 1208, the administrator obtains investment data for theSD or self directed contract. Step 1210 determines whether income hasbeen received from the SD investment. If YES, the system goes to FIG. 7,step 510 as noted in jump step 1211. If NO, the system determines, indecision step 1212, whether principal has been received from the SDinvestment. If YES, the system goes, in step 1213, to FIG. 7, step 512.The output from steps 1211 and 1213 follow the NO branch from decisionstep 1212.

[0093] Decision step 1214 determines whether the SD investment's returnon investment (ROI) is within contract ROI parameters. These parameters,as explained later in connection step 1220 and 1226, are bracket limitsproviding a minimum ROI level and a maximum ROI level. If the selfdirected investment ROI is within the upper and lower ROI brackets(established in step 1204 at the beginning of a contract), the YESbranch is taken from decision step 1214 and subsequent decision step1216 determines whether there is any additional data. If YES, the systemjumps to the main program in jump step 1218. If NO, the program moduleends.

[0094] If the SD investment ROI is outside the bracketed minimum andmaximum contract ROI parameters, the NO branch is taken from decisionstep 1214. Decision step 1220 determines whether the ROI is greater thanthe contract ROI parameter. If so, step 1222 pours over or transfers theexcess ROI, whether income or principal, to a supplemental accountestablished for the subscriber/beneficiary. Step 1224 permits thesubscriber/primary beneficiary to redeem the supplemental account orreinvest that supplemental account pursuant to earlier instructionsreceived in steps 110, 1202 and 1204. The remaining balance is assignedto the subscriber's primary increasing income account. The system endsafter execution of step 1224. If the supplemental account or excess SDROI funds are reinvested, the reinvestment will follow the self directedinvestment instructions originally obtained from the subscriber or theprimary beneficiary. For example, the subscriber/primary beneficiary mayrecommend that all dividends in excess of the bracketed ROI be sweptinto a money market account. When the money market account reaches apredetermined value, for example, $10,000.00, the $10,000.00 would beinvested in a blue chip stock. Otherwise, the excess ROI could bedistributed on a quarterly basis directly to the subscriber/primarybeneficiary as part of his or her increasing income or separately, apartfrom any increasing income. For example, if the increasing income wasonly to be paid to primary beneficiaries ten years or more after theinception of the contract, the subscriber/primary beneficiary may obtaindistributions on a monthly, quarterly or annual basis from the systemadministrator for the excess SD ROI based on exemplary or superlativeinvestment instructions by the subscriber/primary beneficiary. The highlimit is a superlative ROI limit triggering a bookkeeping transfer tothe subscriber's supplemental account. Decision step 1220 establishesthe test for superlative ROI for the self directed investmentinstruction obtained from the subscriber or primary beneficiary.

[0095] Returning to decision step 1220, if the SD ROI does not exceedthe high limit bracket for the contract group, the NO branch is takenand the system executes step 1226 which determines whether the ROI isless than the minimum threshold contract value. If the ROI is not lessthan the minimum, the NO branch is taken and the system executes errorstep 1227. It should be apparent that the ROI must fall within thecontract parameter brackets, above those brackets or below thosebrackets. Hence, error 1227 is a required output from the NO branch ofdecision 1226.

[0096] If the SD ROI is less than the contract parameter, the YES branchis taken and, in step 1228 the computer program generates a call foradditional funds from the subscriber/primary beneficiary. This call mayconstitute an electronic transmission or communication, a telephone callor a letter demanding additional premiums or moneys from the investor tomaintain the self directed account at the appropriate level and to keepit in general balance and equity with the similarly situated primarybeneficiaries in the specified contract group. In step 1230, thecomputer system disables the self directed investment feature for thatparticular subscriber. In step 1232, the computer system determineswhether additional moneys have been received. If YES, the system in step1233 reinstates the SD status and, subsequent thereto, the program ends.If the subscriber or primary beneficiary does not deliver additionalfunds to the system administrator, the system in step 1232 confirms thefailure to obtain additional funds and, in step 1234 liquidates theinvestments of the subscriber/primary beneficiary less a certainpercentage or administrative fee.

[0097] The administrative fee and percentage is placed in a pool withthe funds of the other contract group members in order to compensate thesurviving members of the contract group for the lost of the principal.In other words, the subscriber, who is permitted to self direct hisinvestment funds, should not be able to reap the benefits of theincreasing income feature without a penalty since he or she no longerparticipates in the system because his or her investments do not meetthe minimum return on investment (ROI) required for the contract funds.As stated earlier, the contract is funded based upon the assumption thateach subscriber deposits a certain amount of principal into the fund.That principal generates a return on investment or ROI within certainparameters over a number of years. The increasing amount of the returnon investment is ultimately distributed to the primary beneficiariesinitially enlisted in the fund. As the primary beneficiaries die or pera mortality table, the remaining beneficiaries obtain increasing incomedue to their better survival rate. If an SD subscriber fails to maintainthe appropriate return on investment in the contract fund, and if thesubscriber is forced to liquidate because of his failure, the fundshould be compensated for the lack of principal represented by thaterrant SD subscriber. Step 1236 distributes the liquidated investmentless the appropriate retainer or percentage and administrative fee tothe subscriber. The program subsequently ends.

[0098]FIG. 16 provides a basic flowchart showing how instructions arereceived from the SD subscriber or primary beneficiary. As statedearlier, many subscribers designate themselves as the primarybeneficiary of the increasing income fund. To simplify the descriptionof FIG. 16, reference will be made to “a subscriber” even though theproper designation may be “primary beneficiary” at a certain time. Step1302 accepts an input from portfolio system input 111. In step 1302, thecomputer system confirms that the subscriber has an SD or self directedinvestment account. In step 1304, the system confirms that the SDaccount is within contract parameters established at the inception ofcontract for the contract group. In step 1308, input is obtained in theform of subscriber investment instructions as noted by input 1306. Step1308 confirms that the investment recommended by the subscriber is onthe approved list of investments. Other investment controls arediscussed earlier. Step 1310 obtains return on investment or ROI data onthe new investment based on the instruction of the subscriber. Step 1310also confirms that the past ROI for the recommended investment and thefuture ROI for the recommended investment generally conforms with theROI contract parameters. Decision step 1312 determines whether thesubscriber's investment recommendation and all other earlier steps 1302,1304, 1308 and 1310 are appropriate and approved. If not, the system instep 1314 generates an error message to the subscriber and subsequentlyends. If decision 1312 is YES, the system goes to FIG. 10 in jump step1313 which is the buy-sell investment process.

[0099] If the SD subscriber selected a portfolio management style (e.g.,aggressive), the system administrator would either (a) manage the fundsfollowing the selected management style or (b) turn over fund managementto an investment advisor (e.g., Goldman Sachs). The monitoring of SD ROIis similar.

[0100] The financial product and the computer-based system and processesdescribed herein can be modified by providing partial periodic return ofprincipal to primary beneficiaries over a certain term of the contract.This periodic payment of certain amounts of principal is similar topayments made to annuity beneficiaries. As used herein, the payment ofprincipal includes this feature, if necessary or desirable. In a similarmanner, the financial product of the present invention may include alife insurance component, insuring the life of the primary beneficiary.

[0101] This insurance feature for annuity products is known in thefinancial industry.

[0102] As a further improvement, the financial product described hereinmay include a life insurance component and a contractual provision thatif the value of the principle investment declines and the primarybeneficiary dies, the remaining beneficiaries are guaranteed adistribution of the initial investment.

[0103] This life insurance guarantee feature is currently found in somevariable annuity products.

[0104] These life insurance features can be included in the increasingincome financial product described herein.

[0105] In order to fund the increasing income financial product, thesubscriber has various payment plans. The subscriber could make periodicpayments to the fund administrator. Those periodic payments may run fora certain number of years or may be payable to the fund administratoruntil the beneficiary is a certain age. The following Subscriber PaymentPlan Table lists some of these payment options. Subscriber Payment PlanTable lump sum periodic payments for x years periodic payments untilbeneficiary is y years old pledge (full or partial account) pledge andpay premiums for x years up to $m amount total up to $n amount per year

[0106] Another funding mechanism utilizes the pledge of all or part of asubscriber's financial asset. For example, if the subscriber has abrokerage account with a brokerage house, and the account has a balanceof $250,000.00, the subscriber may pledge $100,000.00 of that account tothe increasing income financial product. This pledge of all or part ofthe subscriber's financial asset or account is diagrammaticallyillustrated in FIG. 17. With a plurality of pledged assets, representedby the squares, one of which is square 1401, the financial product iscreated. When the primary beneficiary associated with the subscriber whopledged his or her assets dies, the fund administrator obtains thepledged assets and takes control of that financial fund. Further, incomefrom the acquired fund is then paid to the surviving primarybeneficiaries as shown by arrow 1403. As additional primarybeneficiaries in the contract group die, additional amounts ofincreasing income are paid as shown by arrow 1405. When there are veryfew surviving primary beneficiaries, a greater amount of income isdistributed as shown by arrow 1407 and the large $ associated therewith.When all the primary beneficiaries die or upon the occurrence of theexpiration parameter associated with the group contract, the principalof the increasing income fund is distributed to the secondarybeneficiaries of subscribers/primary beneficiaries A, B, C. Thesesecondary beneficiaries are identified as A_(sb), B_(sb), and C_(sb).

[0107]FIG. 18A diagrammatically illustrates the payment and initialdistribution of increasing income (ii) and the final distribution of theprincipal of the increasing income fund. At a time period between 1999and 2009, subscribers funding the program for a primary beneficiaries A,B and C pay premium into the increasing income product. These premiumsare accumulated during that time period 1999-2009. After time 2009,primary beneficiary A dies (represented by the symbol “bar A”) and thesubscriber who pledged his or her financial assets is required to turnover those assets to the fund. The fund administrator may file a lien onthe subscriber's assets prior to that time (before A dies) to secure itsinterests. Further, the time period from t-2009 through t-2011 is anincreasing income payment period such that increasing income is paid toprimary beneficiaries B, C. After time 2011, the primary beneficiary Bdies (as shown by bar B) and the pledged assets are delivered to theincreasing income fund administrator. The primary beneficiary Ccontinues to receive increasing income payments. After time 2013,primary beneficiary C dies, pledged assets associated with that primarybeneficiary are put under the control of the fund administrator and, ifC is the last surviving primary beneficiary, the fund principal isdistributed to the secondary beneficiaries of A, B and C or otherwise asspecified by the contract.

[0108]FIG. 18B diagrammatically shows the operation of the system withpledges made by subscriber or primary beneficiaries A, B and C. At somepoint intermediate time 2009 and time 2011, primary beneficiary A diesas shown by bar A. Increasing income ii is paid to primary beneficiariesB, C. After time 2011, the primary beneficiary B dies and his or herpledged assets are placed in the increasing income fund. Primarybeneficiary C receives increasing income ii at that time. After time2013, primary beneficiary C dies and his or her pledged assets areplaced under the control of the fund administrator. At some timethereafter, depending upon the contractually established expirationparameters, the fund is distributed to the secondary beneficiaries of A,B and C.

[0109]FIG. 19 diagrammatically illustrates a flowchart showing anexample of the subscriber payment routine program. Decision step 1402determines whether the subscriber has delivered a lump sum payment forthe increasing income product. If the YES branch is taken, the system instep 1404 invests the money and jumps to FIG. 7, step 502. As explainedearlier in connection with FIG. 7, that step logs in the premiumpayment, updates records and processes the payment accordingly.

[0110] If the NO branch is taken from decision step 1402, the programexecutes decision step 1410 which determines whether the subscriber ismaking the payment under a periodic payment plan. It should be notedthat the periodic payment plan may be limited to a certain time periodor a certain age of the primary beneficiary (see “t?” in FIG. 19) Thesystem checks the time and frequency of the periodic payment. If the YESbranch is taken from decision step 1410, the system returns toinvestment step 1404. If the NO branch is taken from decision step 1410,the system executes decision step 1412 which determines whether thesubscriber is making a pledge of financial assets and paying periodicpremiums. If the YES branch is taken from decision step 1412, the systemdetermines in decision step 1414 whether the primary beneficiaryassociated with that payment has died. If the NO branch is taken, thesystem identifies the payment as a premium payment in step 1416 andreturns to investment step 1404. If the YES branch is taken fromdecision step 1414 indicating that the primary beneficiary has died, thesystem in step 1418 obtains the pledged financial account or asset. Thesubscriber may pledge all of an account or part of an account. Afterobtaining the pledged account in step 1418, the system jumps to FIG. 4,step 313 or FIG. 8 step 514, both of which essentially process thatinvestment and recognize that the primary beneficiary associated withthat subscriber has died.

[0111] Returning to decision step 1412, if the NO branch is taken, thesystem determines in decision step 1420 whether the subscriber haspledged part or all of his or her financial assets. If the YES branch istaken, the system in decision step 1422 determines whether the primarybeneficiary for that subscriber has died. If so, the YES branch is takenand the system executes step 1418 which obtains the pledged account. Ifthe NO branch is taken, the system executes an error routine. If the NObranch is taken from decision step 1420, the routine ends.

[0112] This claims appended hereto are meant to cover modifications andchanges within the scope and spirit of the present invention.

What is claimed is:
 1. A computerized method for monitoring andmaintaining a financial product, purchased by a plurality ofsubscribers, paying increasing income to a plurality of primarybeneficiaries based upon their comparable survival in a predeterminedgroup including the steps of: providing at least one computer system forprocessing transactions, including subscriber payments and increasingincome payments, and for reporting the status of beneficiary accounts,said subscriber payments including one form of payment from the group ofa lump sum, periodic payments, a pledge of a subscriber's financialasset, and a pledge of a subscriber's financial asset accompanied withperiodic payments; monitoring, via said at least one computer system,the establishment of a plurality of contracts for a correspondingplurality of primary beneficiaries, each primary beneficiary of saidplurality of primary beneficiaries designating a corresponding secondarybeneficiary; monitoring, via said at least one computer system, saidsubscriber payments and obtaining, in the event of a death of arespective beneficiary associated with a corresponding subscriber'spledge, said corresponding subscriber's financial asset pledged aspayment; segregating said plurality of primary beneficiaries into aplurality of contract groups, each contract group utilizing one contractof said plurality of contracts, wherein each primary beneficiary of arespective contract group has (i) substantially similar demographics ascompared with others in the same contract group, and (ii) asubstantially similar contract compared with others in the same contractgroup; monitoring, via said at least one computer system, compliancewith contractual parameters which parameters define unique attributes ofa respective contract of said plurality of contracts for said respectivecontract group, said contractual parameters including: (i) a beginningof an increasing income payment period, (ii) an expiration parameterrepresenting an ending of said increasing income payment period, (iii)the presence or absence of an income target value, and, (iv) thepresence or absence of an invasion of principal parameter; monitoring,via said at least one computer system, an investment of funds created bysaid subscriber payments on behalf of said primary beneficiaries incompliance with said contractual parameters for said plurality ofcontracts; directing and reporting, via said at least one computersystem, the payment of increasing income to primary beneficiariessurviving others in said respective contract group of said plurality ofcontract groups; and, directing and reporting, via said at least onecomputer system, the payment of principal to said secondarybeneficiaries upon the occurrence of said expiration parameter for saidrespective contract group.
 2. A method as claimed in claim 1 wherein thestep of monitoring investments is processed substantially independentlywith respect to the steps of monitoring the establishment of thecontracts, processing subscriber payments and directing payment of saidincreasing income.
 3. A method as claimed in claim 1 wherein thebeginning and an ending of an increasing income payment period includesat least one inception contractual parameter and a closure contractualparameter.
 4. A method as claimed in claim 1 wherein said expirationparameter includes the step of determining at least one from the groupof (i) whether all primary beneficiaries have died; (ii) a predeterminedtime has past since said beginning of said increasing income paymentperiod; (iii) the occurrence of a predetermined contractual event.
 5. Amethod as claimed in claim 1 wherein said step of monitoring thepresence or absence of said income target value includes monitoringfactors relative to at least two from the group of income generationfrom a predetermined investment, realized capital gain, unrealizedcapital gain, prospective capital gain, and a time factor associatedwith said predetermined investment.
 6. A method as claimed in claim 2wherein the beginning and an ending of an increasing income paymentperiod includes at least one inception contractual parameter and aclosure contractual parameter.
 7. A method as claimed in claim 6 whereinsaid expiration parameter includes the step of determining at least onefrom the group of (i) whether all primary beneficiaries have died; (ii)a predetermined time has past since said beginning of said increasingincome payment period; (iii) the occurrence of a predeterminedcontractual event.
 8. A method as claimed in claim 7 wherein said stepof monitoring the presence or absence of said income target valueincludes monitoring factors relative to at least two from the group ofincome generation from a predetermined investment, realized capitalgain, unrealized capital gain, prospective capital gain, and a timefactor associated with said predetermined investment.
 9. A method asclaimed in claim 1 including the step of providing at least twointerconnected computer systems and wherein the steps of processingtransactions, subscriber payments, increasing income payments, andreporting the status of beneficiary accounts are executed by one of saidtwo computer systems and wherein the step of monitoring the investmentof funds is executed by the other of said two computer systems.
 10. Amethod as claimed in claim 9 including the step of establishing atelecommunications link between said two interconnected computer systemsto exchange data relative to said processing transactions and saidmonitoring the investment of funds.
 11. A method as claimed in claim 1wherein said plurality of contracts is one of an irrevocable trustcontract, an annuity contract, a life insurance contract, a contractestablishing a closed end mutual fund, a limited partnership contract,and any other type of legal contractual structure, and said monitoringand compliance step maintaining compliance with contractual parametersestablishing said one contract.
 12. A method as claimed in claim 11wherein said annuity contract is one of a life annuity, an annuity for aterm of years, an annuity for a life plus a survivor's life, an annuityfor a life plus a survivor's life limited by term of years, and saidmonitoring and compliance step maintaining compliance with contractualparameters establishing said one annuity contract.
 13. A method ofmonitoring and maintaining a financial product, purchased by a pluralityof subscribers, paying increasing income to a plurality of primarybeneficiaries based upon their comparable survival in a predeterminedgroup including the steps of: obtaining subscriber payments for fundingsaid increasing income financial product, said subscriber paymentsincluding one form of payment from the group of a lump sum, periodicpayments, a pledge of a subscriber's financial asset, and a pledge of asubscriber's financial asset accompanied with periodic payments;establishing a plurality of contracts for a corresponding plurality ofprimary beneficiaries, each primary beneficiary of said plurality ofprimary beneficiaries designating a corresponding secondary beneficiary;monitoring said subscriber payments and obtaining, in the event of adeath of a respective beneficiary associated with a correspondingsubscriber's pledge, said corresponding subscriber's financial assetpledged as payment; segregating said plurality of primary beneficiariesinto a plurality of contract groups, each contract group utilizing onecontract of said plurality of contracts, wherein each primarybeneficiary of a respective contract group has (i) substantially similardemographics as compared with others in the same contract group, and(ii) a substantially similar contract compared with others in the samecontract group; assuring compliance with contractual parameters whichparameters define unique attributes of a respective contract of saidplurality of contracts, said contractual parameters including: (i) abeginning of an increasing income payment period, (ii) an expirationparameter representing an ending of said increasing income paymentperiod, (iii) the presence or absence of an income target value, and,(iv) the presence or absence of an invasion of principal parameter;directing the investment of funds created by said subscriber paymentsfor said plurality of contracts; directing and reporting the payment ofincreasing income to primary beneficiaries surviving others in saidrespective contract group of said plurality of contract groups; and,directing and reporting the payment of principal to said secondarybeneficiaries upon the occurrence of said expiration parameter for saidrespective contract group.
 14. A method as claimed in claim 13 whereinthe step of assuring compliance with the contractual parameter of saidincome target valve utilizes factors relative to income generation froma predetermined investment, prospective and realized capital gain, andan investment time factor associated with said predetermined investment.15. A method as claimed in claim 13 including the step of assuringcompliance with a closure contractual parameter, said closurecontractual parameter including one from the group of a maximum numberof primary beneficiaries in said contract group, a total monetary limitassociated with said respective contract for said respective contractgroup, and a predetermined time period.
 16. A method as claimed in claim13 wherein said contractual parameter relative to said beginning of anincreasing income payment period is an inception parameter, saidinception parameter is at least one parameter from the group including aminimum number of primary beneficiaries in said contract group, aminimum monetary limit associated with said respective contract for saidrespective contract group, a predetermined time from acceptance ofpayment from a subscriber on behalf of a primary beneficiary, and anycontractually defined event.
 17. A method as claimed in claim 16wherein, in said step of assuring compliance, said inception parametercorrelates to a beginning of an accumulation of income time period whichwill, at some time in the future, support increasing income payments tosurviving primary beneficiaries in a respective contract group.
 18. Amethod as claimed in claim 17 wherein said step of assuring complianceincludes assuring compliance with a contractual closure parameter, saidclosure parameter including one from the group of a maximum number ofprimary beneficiaries in said contract group, a total monetary limitassociated with said respective contract for said respective contractgroup, and a predetermined time period, said closure parameter relatingto a predetermined closure event which, as a result thereof, saidadministrator is contractually prohibited from placing additionalprimary beneficiaries into said respective contract group.
 19. A methodas claimed in claim 18 wherein, in said step of assuring compliance,said expiration parameter relates to said end of said accumulation ofincome time period and payment of increasing income payments tosurviving primary beneficiaries in a respective contract group, and anoccurrence of said expiration parameter event triggering said step ofdirecting and reporting the payment of principal.
 20. A method asclaimed in claim 19 wherein, in said step of assuring compliance, saidincome target value utilizes factors including income generation from apredetermined investment, prospective and realized capital gain, and aninvestment time factor associated with said predetermined investment.